4 Lessons From a Failed Entrepreneur
Updated: Jul 2, 2018
Warning: I’ve done things in my life (particularly in business) so stupid they would defy belief.
Yet that is precisely why I hope you will read what I have to share? Failure is one of the best teachers, and I believe if you have aspirations of being an entrepreneur, some of these lessons may come handy. You may very well know some of these points already. Still, I think my experience failing in business may help confirm what you already know, and urge you to think very well before you take the plunge, and prepare well when you set out on your own.
1) A good business idea need not be your “best” idea:
There was a time I was convinced that a good business is built only on an idea you are crazy about. This could be based on a passion, strength, or an idea that has become a pet project for you. Today I see things a little differently. This doesn’t mean that we pursue a business without heart and mind in it. I am only saying that sometimes the business idea that may actually work for you may not necessarily be in your top list of preferred offerings.
Suggestion: It may take some openness, flexibility, learning and risk appetite to willingly consider other options. Building a business on your first choice idea / pet project may work if you have the luxury of time and surplus money.
2) There is no such thing as a zero capital business:
I made the mistake of thinking “how much would we really need for a services business offering what we were good at!” Well even if sustaining yourself is the only cost, that’s a form of indirect capital. Then you need something factored for sales bandwidth, travel costs, the bare minimum miscellaneous expenses, and the unforeseen costs of sales. This tends to add up in ways you’d never expect.
Suggestion: If you are starting a business, plan for everything you can foresee… and for the many things you can’t. Build substantial cash reserves.
3) Profitability and cash-flow… the acid test!
More important than the planning sheets, the marketing collaterals, the pre-sales target lists and the fancy website is SALES…closures that bring in immediate cash. The proof of concept in a business is not so much the viability of the product or service but the proof that YOU can SELL it! I made the fatal mistake of seeing a few interested prospects and thinking that when we jump into business full-time we will sell and see the revenues.
A good approach will focus on selling first, and will factor in hard negotiations from customers, delayed payments, bad debts, and unprofessional customers who end up being unprofitable. Once we started out, we realized we weren’t seeing the sales closures we expected. We also realized some of the business we got had to be partially sub contracted, and this didn’t give us the margins we needed. And a few customers were disasters… who still haven’t paid up. Revenue is crucial. Profitable revenue! Collected profitable cash in hand! It’s the only thing that matters to the immediate life of the business.
Suggestion: Test your ability to sell and attain steady cash flows before you jump in full-time or abandon a current revenue stream.
4) Buyers are not necessarily rational
Your value prop, differentiators, and USP can only get you so far. Often decision makers just didn’t sign the dotted line despite being convinced we could deliver. In many cases, we discovered they were comfortable doing business with the folks they already knew. In some cases we were rejected because we didn’t position ourselves as “expensive enough”! On other occasions prospects told us they would only work with a “well-known brand”. We had an instance of one customer who was willing to pay a known brand three times what they willing to pay us even though they admitted we delivered a better job!! Admittedly, some of these are simple sales challenges.
And the lessons are:
a) Provide for enough ramp up time for an extended sales cycle, and for a really long wait until sales becomes sustainable
b) If you / your core team can’t sell, you need someone who really can sell your services for you; someone who can get past all the barriers and close sale after sale
c) Actively network and offer people value as a professional - not just when you need business from someone
On the personal front
Shield your family from financial risk – maintain your current income stream while you test the waters, and take the plunge only when sustainable cash flows emerge.
Be patient, and get your act together financially for the long haul before you begin.
Do not imagine business will come from your contacts and friends – if it does, it’s a bonus; more often the good old cold sale may yield real results and your known contacts may account for nothing.
Here is an excellent read for people planning to start a business…several common themes emerge…
Finally, failing isn’t a bad thing by itself. It’s how we learn from failure that matters. And for those of us who haven’t yet entered business, let’s learn from the failures of others instead of being bull-headed like I was!